JOHANNESBURG, Gauteng — Eskom group chief executive Dan Morakane has proposed that funds allocated for free basic electricity be directed straight to the power utility rather than through municipalities. This call for direct funding comes as Eskom reports a record profit of 30.3 billion rand, even as mounting municipal debt—now exceeding 120 billion rand—poses a critical risk to the entity’s long-term financial sustainability.
Eskom’s financial turnaround, which more than doubled the previous year’s profit, was achieved despite a 6.2% decline in electricity sales volumes driven by dropping industrial demand. Morakane attributed the success to a three-year operational turnaround plan, improved power station efficiency, and significantly reduced diesel expenditures. Consequently, South Africa has now gone more than a year without load shedding, with the utility achieving its highest energy availability factor (EAF) in six years. Several power stations are currently operating between 63% and 95% availability, allowing Eskom to maintain 100% coverage in meeting national electricity demand.
However, Morakane emphasized that the municipal debt crisis, which has climbed from just over 111 billion rand to 120 billion rand, has escalated from an Eskom-specific issue to a national country risk. To combat non-payment and revenue non-collection, he advocated for two primary interventions. First, the funding mechanism for free basic electricity for indigent families, which relies on outdated estimates, should be restructured so that the associated funds are paid directly to Eskom as the service provider. Second, he highlighted that municipalities currently retain equitable grants without settling their bulk service debts. He noted this is a systemic issue also observed in the water sector, requiring urgent National Treasury intervention to ensure a proportion of those grants is allocated to pay for electricity.
Acknowledging the frustration of compliant consumers who bear the cost of municipal debt collection failures, Morakane clarified that only a 2% portion of the current tariff is allocated to cover poor debt collection. He stressed that classical debt collection methods, such as disconnecting major municipalities like the City of Johannesburg, are not viable solutions. Instead, the focus must be on broader municipal funding model reforms. To provide consumer relief, the Eskom board has committed to avoiding future double-digit tariff increases, with future pricing expectations to be guided more closely by inflation rates.
To further absorb costs and avoid steep price hikes, Eskom is aggressively pursuing internal savings, having saved 22.4 billion rand in the past year toward its 112 billion rand target for the 2030 financial year. Additionally, to tackle non-technical losses from electricity theft, the utility is rolling out seven million smart meters over the next two years. This initiative has already shown measurable improvements in limiting theft and enhancing revenue predictability in areas where the meters have been installed.
Regarding the long-discussed unbundling of Eskom into separate generation, transmission, and distribution entities, Morakane noted that such structural shifts typically take five to ten years globally, and sometimes require fine-tuning. Given South Africa’s unique challenge with structured municipal non-payment, the pace of unbundling will depend on resolving this debt first. The Eskom restructuring task team is expected to present concrete solutions within the next three to four months. Any structural movement will also require consent from nearly 25 lenders who hold collateral over the group’s current assets.
These developments coincide with the revised electricity pricing policy draft, which is currently open for public comment over the next 30 days. The review aims to establish protective dispensations not only for hard-pressed industries like smelters but also for middle-class and low-income households, ensuring a more equitable and sustainable energy future for all South Africans.